Diversification Versus Discipline - Value Creation in Oil and Gas 2021
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Value Creation in Oil and Gas 2021 Diversification Versus Discipline
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Value Creation in Oil and Gas 2021 Diversification Versus Discipline Rebecca Fitz, Clint Follette, Matthew Abel, Chris DiPaolo, and Santosh Appathurai January 2021
AT A GLANCE
International oil companies (IOCs) have underperformed the S&P 500 in total
shareholder returns (TSR) for more than a decade. COVID-19 added to the sector’s
challenges, as a pandemic-induced demand shock sent oil and stock prices tum-
bling. Even after rallying late in 2020, oil and gas is in last place among tracked
industry sectors for TSR. Investors expect demand to recover in the second half of
2021, but most predict that oil and gas companies will not fully capture this upside.
Differing Responses
During the pandemic, IOCs have accelerated their transformation plans for a
radically altered energy system. European players are becoming broad-based energy
companies. North American IOCs are keying on hydrocarbons and increasing
efficiencies. Despite these different strategies, US-based Chevron and France-based
Total were TSR winners thanks to balance sheet strength and payout sustainability.
Preparing for the Future
IOCs must be proactive if they are to create value and win back investor confidence.
European companies must prove the business case for low-carbon investments,
and North American players will need to future-proof their portfolios. Both groups
must improve their operational returns to continue their transformation journey.
2 Value Creation in Oil and Gas 2021C OVID-19 has added to the woes of a global oil and gas sector that was already
struggling with persistently low total shareholder returns (TSR). (See the
sidebar “The Components of TSR.”) Starting in early 2020, the pandemic unleashed
the largest oil and gas demand shock in history. Social distancing and national
lockdowns brought economies to a standstill, sending oil prices tumbling. Oil and
gas companies’ share prices and earnings followed in short order.
For Big Oil, 2020 wasn’t just about the harsh business environment. The pandemic
has caused international oil companies (IOCs) to accelerate their plans to reinvent
themselves for a new energy landscape. With less capital available to spend, deci-
sions on how to allocate it have become starker. As a result, a clear split has
emerged in companies’ strategies for the future, with significant implications for
value creation.
On one side of the strategic divide, European IOCs are ramping up their expansion
into renewables and low-carbon energy businesses in pursuit of growth. On the 60% of investors in
other, their North American peers are focusing on what they know best, doubling our survey expect the
down on oil and gas production while investing in technologies to increase efficien- sector’s median TSR
cies and reduce greenhouse gas (GHG) emissions. over the next two
years to be no higher
But regardless of their approach, neither group has yet to prove to investors that it than it was over the
can create sustained value. Boston Consulting Group’s survey of 150 oil and gas in- past two years.
vestors worldwide, conducted in October 2020, found that two-thirds of sharehold-
ers expect demand to return to pre-COVID-19 levels in the second half of 2021.
They also expect prices to rise.
Nevertheless, few investors expect companies to capture this upside, with 60% pre-
dicting that the sector’s median TSR over the next two years will be the same as or
even lower than it has been over the past two years. To overcome this perception,
companies must make fundamental changes across their businesses that transform
investor sentiment and drive a share valuation rerating.
Oil and Gas Has Fallen Behind Other Sectors
In this report, we analyze the historical TSR performance and key valuation drivers
of both global and regional players, with a particular focus on the majors—the five
largest publicly traded integrated IOCs. (See the sidebar “Companies in Our Sam-
ple.”) We examine the ways past and present strategies have impacted returns and
suggest steps to create future shareholder value.
Boston Consulting Group 3THE COMPONENTS OF TSR
Total shareholder return is measured tion of free cash flow payouts to a
as the return from a stock invest- company’s TSR.
ment, with the assumption that all
dividends are reinvested in the stock.
TSR is a product of multiple factors.
(See the exhibit below.)
Our approach deconstructs TSR into
a number of underlying drivers. We
use a combination of revenue growth
and margin change to assess changes
in fundamental value. We then factor
in the change in a company’s valua-
tion multiple to determine the impact
of investor expectations. Together,
these two factors determine the
change in a company’s market
capitalization and investors’ capital
gain (or loss).
Finally, we track the distribution of
free cash flow to investors and debt
holders in the form of dividends,
share repurchases, and repayments of
debt, and we determine the contribu-
TSR is the Product of a Number of Factors
Three TSR drivers Management levers
Capital gains
Business strategy
1 Profit growth
• Throughput
• Margins
Managing the
business
TSR is the shareholders’
true bottom-line return • Growth expectations
(capital gains + dividends) • Profitability expectations
• Meeting of expectations Investor strategy
Change in • Confidence in management Managing the multiple
TSR
2 valuation
• Portfolio changes
(the relative multiple is
multiple predictable and can
• Targeting optimal investors be influenced)
• Financial policies
• Risk factors (debt, volatility)
• Dividends Financial strategy
Cash flow • Share repurchases or issues Managing capital
3 contribution • Capital structure change deployment priorities
• Excess cash buildup and the balance sheet
Source: BCG analysis.
4 Value Creation in Oil and Gas 2021COMPANIES IN OUR SAMPLE For our report on value creators in the nies about 20% each, exploration and oil and gas industry, we selected 76 production (E&P) companies around companies from ten peer groups (See 15%, refining and marketing (R&M) the appendix for the full list). We companies roughly 11%, and other excluded oilfield services companies. integrated players about 6%. Each company in the sample was Our study looked at TSR performance valued at more than $6 billion (as of over a ten-year price cycle from July January 1, 2020), had a free float of at 2010 through July 2020. Furthermore, least 20%, and existed prior to 2015. we examined value creation over The companies we studied had a three- and five-year time periods. combined enterprise value of $3.2 These analyses provided additional trillion as of July 31, 2020. Of this insights into how companies’ perfor- figure, the majors accounted for mance changed during different oil approximately 28%, national oil price and market environments. companies and midstream compa- Value creation among leading oil and gas companies has been unimpressive for several years. Despite a late-year 2020 rally, the oil and gas sector delivered median annualized TSR (share price appreciation plus dividends) of –2% for the five years from November 30, 2015, through November 30, 2020, and still finished in last place among the sectors that BCG looks at. (See Exhibit 1.) For the industry’s big- gest players—the majors and other leading IOCs—median annualized TSR has remained in the third and fourth quartiles, when compared with the constituents of the S&P 500 Index, over one-, three-, five-, and ten-year time frames. (See the appendix for details of the top 20 oil and gas TSR performers over these time periods.) Changes in strategy and external factors help to explain the sector’s underperfor- mance. Until the 2008–2009 global financial crisis, rising global demand and limited supply buoyed oil and gas prices, resulting in good earnings growth, strong balance sheets, and steadily greater dividend payouts. Starting in 2009, however, companies overinvested in higher-cost assets, which delivered weaker returns and tarnished the industry’s reputation as a responsible steward of shareholder capital. As the US shale boom reached its zenith, it flooded energy markets with abundant supplies of oil and gas, leading to a steep drop in prices in 2014 that undermined the IOCs’ profitability. Companies responded by cutting costs, making portfolio de- cisions on the basis of value rather than volume, and increasing borrowing. By 2019, the environment had changed again. Even before the pandemic, growing investor concerns about peak oil and gas demand, the industry’s GHG emissions, and com- petition from renewable energy sources were weighing on share prices. In tandem with changing strategies and new pressures, IOCs’ TSR performance has steadily worsened over the past decade as companies, faced with diminishing prof- Boston Consulting Group 5
Exhibit 1 | The Oil and Gas Sector Continues to Underperform Others in TSR
Five-year high, low, and median TSR for sample sectors, November 2015–November 2020 (annualized, %)
90
80
70 First-quartile cutoff
60 Median
50 Third-quartile cutoff
40
30
20
10
0
–10
–20 Consumer Large-cap Aerospace
Technology Retail Chemicals Insurance
–30 durables pharma and defense
Oil and
Green energy and Power and Communications gas
Mining Med tech Metals Banks Automotive
environment gas utilities service provider
OEMs
Sources: S&P Capital IQ; BCG ValueScience Center.
its, have come to rely more on quarterly dividend programs to prop up their share
prices and create value for investors. Their dependence on payouts as the main
driver of TSR has resulted in higher debt and caused them to rank poorly against
companies in other sectors that offer investors access to a broader value creation
proposition.
After outperforming the S&P 500 in annualized TSR over the prior five years, glob-
al IOCs achieved a median annualized TSR of 7%—less than half that of S&P 500
constituents—from January 2009 through December 2014. And from January 2015
to the beginning of 2020, the IOCs’ median annualized TSR fell to 3% versus 12%
for the S&P. (See Exhibit 2.)
Revenues and Debt Were Key Drivers of Five-Year TSR
Over the five years ending in July 2020, the sector’s strongest performers delivered
revenue growth while keeping debt levels stable. As a result, dividend payouts were
less important in driving value creation for these TSR leaders, which included inter-
national exploration and production (E&P) players and national oil companies.
In contrast, North American E&P and Canadian integrated players were the main
laggards, owing to a vicious cycle of poor earnings—caused primarily by low oil
prices—that resulted in higher debt. (See Exhibit 3.) Because of their weakened
share prices, these two peer groups have recently been at the leading edge of an
M&A drive toward more basin-level consolidation, both as targets and acquirers.
Consolidation offers the opportunity to take out cost and increase scale efficiencies,
thereby driving future earnings growth. Higher oil prices in the future, due in part
to insufficient investment by oil and gas companies in their upstream operations,
might also provide an earnings boost for players across the sector.
6 Value Creation in Oil and Gas 2021Exhibit 2 | Over the Past Two Decades, Global IOCs Have Managed Through Several Distinct Eras, with
Increasingly Lackluster Results Relative to the S&P 500
Average annual TSR
TSR Index: January 2004 =100 January 2004–November 2020
500 452
S&P 500: 9%
400
300
200 174
Global IOCs: 3%
100
0
Jan Jan Jan Jan Jan Jan Jan Jan Jan
2004 Jan 2006 Jan 2008 Jan 2010 Jan 2012 Jan 2014 Jan 2016 Jan 2018 Jan 2020
2005 2007 2009 2011 2013 2015 2017 2019
Era 1 Era 2 Era 3 2020
Postmerger era: Runaway spending Retrenching for Next era
supply-constrained erodes earnings growth lower for longer
world
TSR (annualized, %)
Global IOCs 7 7 3 –31
S&P 500 –4 18 12 14
Sources: S&P Capital IQ; BCG ValueScience Center.
Note: TSR values, share prices, and market cap are as of November 2020. Global IOCs include BP PLC, Chevron, ConocoPhillips, Eni SP,
ExxonMobil, Repsol, Royal Dutch Shell, and Total.
Over the most recent five-year period, declining revenues and rising debt hindered
the majors’ TSR performance, although Chevron still managed to rank among the
top 20 oil and gas companies for shareholder returns. (See Exhibit 4.) Overcoming
these two hurdles remains a serious challenge for companies seeking to create
shareholder value. Oil and gas companies are failing to generate competitive TSR
compared not just with other sectors but also with players operating in different ar-
eas of the energy industry, such as renewables developers.
The Importance of Dividends During the Pandemic
The pandemic caps a challenging decade for oil and gas, which has seen investor
interest in the sector wane. The share of oil and gas companies in the S&P 500 is
currently about 2% of the index’s total market capitalization, down from about 16%
in 2008. As individual companies’ market capitalization has shrunk, comparative
newcomers have overtaken former stock market giants. In Europe, the market cap
of Danish offshore wind company Orsted has surpassed that of BP; and in the US,
NextEra—another energy company with a strong renewables presence—briefly sur-
passed ExxonMobil and Chevron in October on the same measure.
In 2020’s challenging and uncertain business environment, the US’s Chevron and
France’s Total were the TSR winners among the majors. Although share prices of
all the IOCs fell sharply during the year, these two companies had the necessary
balance sheet strength to maintain quarterly payouts—despite pursuing widely dif-
Boston Consulting Group 7Exhibit 3 | Oil and Gas Companies with High Exposure to North American Upstream Ranked Worse
for TSR
Five-Year TSR, July 2015–July 2020
TSR (%)
60 Leading
performance
Median
40
Lagging
performance
20
13
7 3
0 1 0 0
–4
–7 –9
–14
–20
–40
Average
19 57 44 22 23 182 36 34 13 19
enterprise
value
($billions) NOC European Majors North American Canadian
integrated diversified E&P Integrated
Category International Midstream International North North American
E&P R&M American R&M pure-play E&P
Sources: BCG ValueScience Center; BCG analysis.
Note: R&M = refining and marketing; NOC = national oil company, NA = North American; E&P = exploration and production. For companies in
each subsector, see the Appendix.
fering portfolio strategies. Their valuation multiples (measured as enterprise value
divided by earnings before interest, taxes, depreciation, and amortization) also held
up better than their peers’ valuation multiples did.
Indeed, a robust balance sheet and the ability to maintain dividend payouts were
key differentiators between the TSR leaders and the laggards in Europe in 2020. For
oil companies BP and Royal Dutch Shell, cutting the dividend removed a key sup-
port for their share prices and TSR. Shell’s stock fell by about 16% in the week fol-
lowing a two-thirds reduction in the payout on April 30 (it announced a modest in-
crease in October to placate investors). BP’s stock also underperformed after it cut
its dividend by 50% in early August and provided further details about its transfor-
mation from an IOC into an integrated energy company, which it had initially an-
nounced in February 2020. Both stocks approached 25-year lows in early November
before regaining ground later that month in the wake of positive news about prog-
ress toward COVID-19 vaccines.
Unlike BP and Shell, Total’s relatively modest debt position and portfolio bias to-
ward barrels with a low breakeven point enabled the company to avoid a damaging
8 Value Creation in Oil and Gas 2021Exhibit 4 | Most Majors Delivered Flat or Negative Five-Year TSR, Due to Declining Revenues and
Increased Leverage
Five Years, July 2015–July 2020
TSR and the relative contribution (%)
Chevron Total BP Royal Dutch Shell ExxonMobil
10
5
3
0
0
–5 –4
–6
–10 –8
Earnings growth Change in multiple Financial framework TSR
Revenue growth Margin change Multiple expansion Payouts Leverage Total TSR
Source: S&P Capital IQ; BCG ValueScience Center; BCG analysis.
1
Change in the enterprise value divided by earnings before interest, taxes, depreciation, and amortization multiple.
2
Includes dividend contributions and changes in the number of shares.
3
Changes in net debt.
dividend cut. At the same time, a lower dividend yield allayed investors’ concerns
about a future reduction. As a result, the company outperformed its peers on share
price and TSR. Total has indicated that it can continue to fund capex requirements
without seeking external equity or debt financing even if oil prices fall to $25 per
barrel. And it can meet capex and dividend payments on the same basis with oil at
$40 per barrel.
US Majors Showed Differing TSR Performance
Although ExxonMobil, the US’s largest IOC by revenues, maintained its dividend
payout, it trailed Chevron and Total in TSR in 2020—and the other four majors
over the most recent five-year time frame. One important reason: other majors
compensated for declining revenues relatively early by aggressively cutting costs
across their business units and thereby boosting profit margins, but ExxonMobil
took comparable steps later on. As a result, the company’s free cash-flow yield has
deteriorated in recent years and was the lowest of the majors for the 12 months
through December 2019.
Over the past ten years, ExxonMobil’s net debt has risen as the company has con-
tinued to fund capital expenditures and generous quarterly dividends despite weak-
ening sales. In a rearguard response to the pandemic-induced decline in oil and gas
prices, the company in April cut 2020 capex by 30%. It reduced future capital spend-
Boston Consulting Group 9ing in late November and announced that it was writing off between $17 and $20
billion in investments primarily in US natural gas projects, several months after
other majors had taken billions of dollars in impairment charges.
ExxonMobil still enjoys a higher valuation multiple than its peers. But Chevron, the
company’s biggest US rival, is catching up, thanks to its stronger balance sheet and
clearer ability to fund future dividends. ExxonMobil’s rising dividend yield suggests
that shareholders have doubts about the certainty of future payouts, putting pres-
sure on the company’s multiple. In a sign of where investor priorities lie, US activist
funds reportedly urged ExxonMobil in December 2020 to cut costs and curb its
spending, over concerns that its dividend was at risk.
Four Actions for European IOCs
BP plans to build Owing to the market turmoil caused by COVID-19, maintaining dividend payout
70,000 electric levels was a key path to delivering peer group-leading TSR. But the pandemic had
vehicle charging other important impacts as well. Several European majors revised their outlook for
points by 2030, up future oil demand downward, partly in response to the pandemic. Lower expecta-
from 7,500 today. tions for crude have caused these players to alter their attitude toward renewable
energy and view it as an opportunity rather than a competitor.
European IOCs are reinventing themselves as broad-based energy companies in or-
der to benefit from higher valuations and more positive investor sentiment toward
alternative energy. They are expanding into growing low-carbon markets in renew-
ables, hydrogen, and biofuels. They are leveraging existing customer-facing busi-
nesses to unlock value from new forms of energy consumption. For example, BP
plans to build 70,000 electric vehicle charging points by 2030, up from 7,500 today.
And they are growing their integrated gas businesses because the fuel has a more
favorable outlook than crude oil in their medium- to long-term forecasts.
European IOCs will need to take several steps to ensure a smooth journey as they
continue to transform.
Maximize returns from hydrocarbons. US players aren’t alone in needing to im-
prove returns from their upstream oil and gas operations. European companies
must make similar reforms if they are to fund their transformation into energy com-
panies, meet debt reduction targets, and pay the dividends that investors crave.
They will have to generate these returns while grappling with an extremely difficult
macroenvironment. So-called high-grading (in which producers concentrate their
efforts on the most profitable fields) will help. But companies must also make their
operations more efficient and reduce emissions, using new technologies to curb
methane leaks and digitize important areas of the business. They must ensure that
these measures receive sufficient resources and management attention despite
other pressing priorities.
Prove the business case for low-carbon investments. In our investor survey, share-
holders expressed enthusiasm for clean energy investments. Their expectations for
the sector’s TSR, however, suggest that they are skeptical about companies’ ability
to turn a profit from them. There are clear reasons for this skepticism. Although
10 Value Creation in Oil and Gas 2021low-carbon investments generally have better growth prospects, returns on individ-
ual projects tend to be lower than for traditional oil and gas production. And
because these businesses are closer to utility businesses, managing them requires a
different mindset. As European IOCs pivot away from hydrocarbons, they will need
to persuade investors of the long-term benefits of evolving from oil and gas produc-
ers into energy companies—and of the companies’ ability to deal with challenges
along the way.
Efficiently allocate capital across the portfolio. European IOCs will also need to
spend large sums on M&A to move the dial on alternative-energy investments. Most
would have to invest around $5 billion a year to make a difference to group-level In our October 2020
returns. But suitably large acquisition opportunities are scarce, and high prices for survey, respondents
sought-after assets could erode investment returns. Companies will have to allocate said they preferred
capital efficiently if they are to scale up their low-carbon investments in a way that reasonable debt
doesn’t erode the value of these new businesses and at the same time provides levels and dividend
sufficient funding for their oil and gas operations. growth over share
buybacks.
Optimize the shareholder payout strategy to boost TSR. In the wake of the pan-
demic, European players have developed a range of approaches for rewarding
investors. Some plan to grow the dividend, while others have announced their
intention to hand back surplus cash by repurchasing investors’ shares rather than
raising payout levels. These approaches will have different effects on value creation.
In our experience, buybacks are less effective than dividends as a way to boost TSR
because they are less predictable and because, in the absence of dividends, compa-
nies must resort to other TSR levers, such as earnings growth and changes in their
valuation multiple. Investors concur: in our October 2020 survey, respondents said
that they preferred reasonable debt levels and dividend growth over buybacks.
Taking the right approach will be essential if companies are to secure investor
support for the future.
Four Actions for North American IOCs
For the most part, North American IOCs are focusing on the traditional oil and gas
businesses where they have existing expertise and well-defined capabilities. Rather
than moving aggressively into new low-carbon areas, they are developing plans to
curb GHG emissions across their businesses.
These players still enjoy higher multiples than their European counterparts, thanks
to their stronger balance sheets and track record on payouts. But to generate the
healthy returns they achieved in the past, irrespective of oil price movements, they
must build greater financial resilience by improving the efficiency of their opera-
tions and driving down costs.
Here are four specific actions that North American companies can take to create
greater value for shareholders.
Transform the core. Companies can’t afford to wait for the reemergence of higher
prices to promote earnings growth. They must adopt a transformation agenda that
drives continuous improvement throughout the organization. This agenda should
Boston Consulting Group 11cover multiple aspects of the transformation process. For starters, companies should
strengthen governance of capital allocation decisions. They should also take steps
that deliver operational benefits, such as introducing value-creating digital technol-
ogies, adopting more agile ways of working, and developing new types of collabora-
tive relationships with their key suppliers.
Future-proof the hydrocarbon portfolio. Oil and gas producers must prepare for a
more carbon-constrained world by improving their portfolios’ resilience to changing
demand, growing concerns about climate change, and the likelihood of higher taxes
and increased regulation for heavy GHG emitters. To secure investor support—and
benefit from a potentially higher multiple—companies must develop meaningful
emissions reduction plans and demonstrate progress toward meeting emissions
targets. The US majors have lagged behind not just European IOCs but also several
larger North American E&P players in creating GHG reduction programs. Exxon-
Mobil recently responded to this need by unveiling tougher plans in December
2020. All companies should consider whether their targets are sufficiently demand-
ing to maintain backing among investors that are already concerned that decarbon-
ization will lead to stranded hydrocarbon assets. They should also run projections
to see how their portfolios perform under different regional and global scenarios
involving changes in demand, regulations, and markets, and use their findings to
drive smarter capital allocation decisions.
Build and scale new businesses. Although North American companies will continue
to focus primarily on oil and gas in the near term, they need to respond to the
changing energy landscape by developing material businesses in new areas. They
should explore opportunities to invest in low-carbon hydrogen, which holds the key
to decarbonizing large sectors of the global economy, and in carbon capture, utiliza-
tion, and storage (CCUS). The introduction of a more generous federal tax credit in
the US has improved the commercial viability of CCUS in enhanced oil recovery,
which relies on CO2 to increase the amount of oil extracted from a reservoir.
Use a tactical approach to M&A. We expect M&A to play an important role as
companies seek to strengthen their position in key basins. Consolidation will enable
companies to create value through enlarged revenues and reduced costs and to
acquire cleaner, more resilient assets. As they consolidate, North American E&P
players have a significant opportunity to drive TSR by cutting administrative,
nonproduction costs. In the second quarter of 2020, the 35 largest independent E&P
companies in the US spent 15% of their revenues on selling, general, and adminis-
trative (SG&A) expenses, compared with the US majors’ figure of just 7%. All
players will have to use M&A tactically to gain a specific end and seize opportuni-
ties as they arise.
G lobal energy systems are changing irreversibly. Oil and gas companies will
need to be ready to compete in a bigger arena against a broader array of ener-
gy providers, with TSR performance as the yardstick. As they prepare for the new
energy landscape, they must place shareholder value creation at the heart of their
strategies if they are to win the future.
12 Value Creation in Oil and Gas 2021Appendix
The Oil and Gas Value Creators 2021: Companies Surveyed
Company Subsector Company Subsector
Aker BP International E&P Magellan Midstream Partners Midstream
Apache North American diversified E&P Marathon Oil North American diversified E&P
Bharat Petroleum International R&M Marathon Petroleum North American R&M
BP Majors MOL European integrated
Cabot Oil and Gas North American pure-play E&P MPLX Midstream
Canadian Natural Resources North American diversified E&P Neste International R&M
Cenovus Energy Canadian integrated Noble Energy North American diversified E&P
Cheniere Energy Midstream Novatek International E&P
Chevron Majors Occidental Petroleum North American diversified E&P
China Petroleum and Chemical NOC Oil and Natural Gas Corporation NOC
Cimarex Energy North American pure-play E&P Oil Search Limited International E&P
CNOOC NOC OMV European integrated
Concho Resources North American pure-play E&P ONEOK Midstream
ConocoPhillips North American diversified E&P Ovinitiv North American pure-play E&P
Continental Resources North American pure-play E&P Pembina Pipeline Midstream
Devon Energy North American pure-play E&P Petrobras NOC
Diamondback Energy North American pure-play E&P Phillips 66 North American R&M
Empresas Copec International R&M Pioneer Natural Resources North American pure-play E&P
Enbridge Midstream Plains All American Pipeline Midstream
ENEOS International R&M Polskie Gornictwo Naftowe NOC
Energy Transfer Midstream Polski Koncern Naftowy International R&M
Eni European integrated PTT NOC
Enterprise Products Partners Midstream Qatar Fuel Company Midstream
EOG Resources North American pure-play E&P Repsol European integrated
Equinor NOC Royal Dutch Shell Majors
ExxonMobil Majors Santos International E&P
Galp Energia European integrated SK Innovation International R&M
Gazprom NOC S-Oil International R&M
Hess North American diversified E&P Suncor Energy Canadian integrated
HollyFrontier North American R&M Surgutneftegas International E&P
Husky Energy Canadian integrated Targa Resources Midstream
Idemitsu Kosan International R&M Tatneft NOC
Imperial Oil Canadian integrated TC Energy Midstream
Indian Oil International R&M The Williams Companies Midstream
Inter Pipeline Midstream Total SA Majors
Kinder Morgan Midstream Valero Energy North American R&M
Kunlun Energy NOC Western Midstream Partners Midstream
Lukoil International E&P Woodside Petroleum International E&P
Lundin Energy International E&P
Source: S&P capital IQ; BCG ValueScience Center; BCG analysis.
Boston Consulting Group 13The Oil and Gas Industry’s Top TSR Performers Over Three, Five, and Ten Years
Three Years Five Years Ten Years
(August 2017–July 2020) (August 2015–July 2020) (August 2010–July 2020)
Rank Company TSR (%) Subsector Company TSR (%) Subsector Company TSR (%) Subsector
name name name
1 Neste 50 International R&M Neste 39 International R&M Cheniere Energy 33 Midstream
2 Lukoil 30 International E&P Aker BP 30 International E&P Neste 30 International R&M
3 Gazprom 25 NOC Lukoil 23 International E&P Tatneft 21 NOC
4 Tatneft 23 NOC Tatneft 21 NOC Aker BP 21 International E&P
5 Novatek 22 International E&P 18 NOC Bharat 19 International R&M
Petrobras Petroleum
6 Petrobras 22 NOC Novatek 15 International E&P Novatek 19 International E&P
Qatar Fuel
7 Company 20 Midstream Lundin Energy 13 International E&P Lukoil 18 International E&P
8 Surgutneftegas 14 International E&P 12 NOC Lundin 17 International E&P
Gazprom Energy
International E&P Bharat International R&M Valero 17 North American R&M
9 Santos 13 12 Energy
Petroleum
Aker BP International E&P International R&M Qatar Fuel 16 Midstream
10 6 SK Innovation 9
Company
11 Hess 5 North American 9 Midstream HollyFrontier 13 North American R&M
diversified E&P TC Energy
12 CNOOC 5 NOC Qatar Fuel 8 Midstream Pembina 11 Midstream
Company Pipeline
Magellan
13 PTT 5 NOC PTT 8 NOC Midstream 11 Midstream
Partners
14 Lundin Energy 4 International E&P 5 European integrated Cabot Oil 10 North American
OMV and Gas pure-play E&P
15 TC Energy 4 Midstream 5 NOC Enbridge 10 Midstream
CNOOC
16 Cheniere Energy 3 Midstream Surgutneftegas 4 International E&P TC Energy 10 Midstream
17 HollyFrontier 1 North American R&M Chevron 3 Majors PTT 9 NOC
Bharat Kunlun Energy ONEOK 8
18 Petroleum 1 International R&M 3 NOC Midstream
19 Enbridge 0 Midstream S-Oil 3 International R&M The Williams 7 Midstream
Companies
20 Kunlun Energy 0 NOC Equinor 2 NOC Gazprom 7 NOC
Sources: S&P Capital IQ; BCG ValueScience Center; BCG analysis.
Note: Companies in green type were in the top 20 across all three time periods.
14 Value Creation in Oil and Gas 2021About the Authors Rebecca Fitz is a senior director at the Center for Energy Impact in the Washington, DC office of Boston Consulting Group. You may contact her by email at fitz.rebecca@bcg.com. Clint Follette is a managing director and partner in the firm’s Houston office. You may contact him by email at follette.clint@bcg.com. Matthew Abel is a managing director and partner in BCG’s Houston office. You may contact him by email at abel.matthew@bcg.com. Chris DiPaolo is a knowledge business director for energy in the firm’s Houston office. You may contact him by email at dipaolo.chris@bcg.com. Santosh Appathurai is a partner in BCG’s Houston office. You may contact him by email at appathurai.santosh@bcg.com. Acknowledgments The authors thank Matthew Fletcher for writing assistance and Katherine Andrews, Kim Friedman, Abby Garland, Steven Gray, and Shannon Nardi for their help with editing, design, and production. For Further Contact If you would like to discuss this report, please contact one of the authors. Boston Consulting Group 15
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